Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our condensed consolidated
financial statements and related notes appearing elsewhere in this Quarterly
Report on Form 10-Q and our Annual Report on Form 10-K filed on March 3, 2014.
As discussed in the section above titled "Special Note Regarding Forward-Looking
Statements," the following discussion and analysis contains forward-looking
statements that involve risks and uncertainties, as well as assumptions that, if
they never materialize or prove incorrect, could cause our results to differ
materially from those expressed or implied by such forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those identified below, and those discussed in the section titled
"Risk Factors" included under Part II, Item 1A below.

Overview

We are the provider of a leading cloud-based marketing software platform that
enables organizations to engage in modern relationship marketing. Our software
platform is designed to enable the effective execution, management and
analytical measurement of marketing activities, helping organizations to acquire
new customers more efficiently, build stronger relationships with existing
customers, improve sales effectiveness and drive faster revenue growth. On our
platform, we deliver an easy-to-use, integrated suite of advanced applications,
which today include Marketing Automation, Social Marketing, Marketing
Management, and Real-time Personalization. To enable our customers to obtain
maximum value from our platform, we have created an ecosystem of third-party
applications, as well as a network of resources to foster marketing thought
leadership, sharing and collaboration among our users. Furthermore, we provide
our customers with expert professional services, delivered by marketers, for
marketers, to enable rapid time to value through effective implementation and
usage of our solutions.

We deliver our solutions entirely through a multi-tenant cloud-based, or
Software as a Service (SaaS), architecture which customers can configure to
their specific needs. We designed our platform to be valuable across large
enterprises and small and medium businesses (SMBs) that sell to both businesses
and consumers in virtually any industry. We define the SMB market as companies
with fewer than 1,500 employees and the enterprise market as companies with
1,500 or more employees.

We market and sell our products directly and through a growing network of
distribution partners. Our client base is diverse, with 3,215 customers across a
wide range of industries including business services, consumer, financial
services, healthcare, manufacturing, media, technology and telecommunications.
Representative customers include one or more divisions of the following
companies: Capgemini, CenturyLink, Citrix, General Electric, Hyundai, Medtronic,
Moody's, Panasonic, Symantec and Sony. No single customer represented more than
1% of subscription and support revenue during the three months ended March 31,
2014 and 2013. During the three months ended March 31, 2014 and 2013, our 20
largest customers accounted for approximately 10% of our total revenue. The
percentage of our subscription and support revenue from enterprise customers was
28% and 25% during the three months ended March 31, 2014 and 2013, respectively.

Our direct sales force has separate sales teams for the enterprise market and
for the SMB market. Within our direct sales force, we also have a team that is
responsible for selling to existing customers, who may renew their
subscriptions, increase their usage of our platform and applications, acquire
additional applications from our product family, or broaden the deployment of
our solutions across their organizations. In addition, we have indirect sales
teams that sell to distributors, agencies, resellers and OEMs, who in turn
resell or use our platform to provide managed marketing services to their end
customers. To date, substantially all of our revenue has been derived from
direct sales, but we intend to invest in our indirect sales teams to increase
indirect revenue as a percentage of our total revenue over time.

We provide our solutions on a subscription basis, and we generated revenue of
$32.3 million and $19.7 million for the three months ended March 31, 2014 and
2013, respectively. We derive most of our revenue from subscriptions to our
cloud-based software and related customer support services. Subscription and
support revenue accounted for 89% of our total revenue during each of the three
months ended March 31, 2014 and 2013. We price our products based on customer
usage measures, which can include the number of records in each customer's
database and the number of user seats authorized to access our service. Our
subscription contracts are typically one year in length, but can range from one
quarter to three years in length.

Professional services revenue accounted for 11% of our total revenue during each
of the three months ended March 31, 2014 and 2013. Our solution is designed to
be ready to use immediately upon provisioning of a new customer subscription.
However, we believe that our customers' success is enhanced by the effective use
of modern relationship marketing strategies performed with our software, which
we foster primarily through the sale and delivery of expert services that
educate our customers on the best use of our solutions as well as assist in the
implementation of our solutions. In addition, some of our customers require
services to support integrating their existing systems with our solutions.
Enterprise customers typically exhibit a higher demand for all of these
services. Over the near term, due to market demand for expertise in modern
relationship marketing, we expect our professional services revenue to grow at a
faster rate than our subscription and support revenue, and therefore, to
increase as a percentage of our total revenue. In addition, we also partner with
third party consulting organizations that provide similar services to our
customers in connection with their use of our solutions.

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We generate the majority of our revenue in the United States; however, we are
focused on growing our international business. Revenue generated from our
international customers was approximately 15% and 14% during the three months
ended March 31, 2014 and 2013, respectively.

We have focused on rapidly growing our business and plan to continue to invest
in growth. We expect our cost of revenue and operating expenses to continue to
increase in absolute dollars in future periods. Marketing and sales expenses are
expected to increase in absolute dollars as we continue to expand our sales
teams, increase our marketing activities and grow our international operations.
Research and development expenses are expected to increase in absolute dollars
to support the enhancement of our existing products and the development of new
products. We also intend to invest in maintaining a high level of customer
service and support which we consider critical for our continued success. We
plan to continue investing in our data center infrastructure and services
capabilities in order to support continued future customer growth. We also
expect to incur additional general and administrative expenses as a result of
both our growth and the infrastructure required to be a public company. We also
may acquire or invest in businesses, products or technologies that we believe
could complement or expand our platform and enhance our technical capabilities.
Considering our plans for investment, we do not expect to be profitable in the
near term and, in order to achieve profitability, we will need to grow revenue
at a rate faster than our investments in cost of revenue and operating expenses.
For the remaining nine months of 2014, we expect the demand for our solutions
and services, along with revenue growth rates, to remain strong.

We had net losses of $12.5 million and $9.5 million for the three months ended
March 31, 2014 and 2013, respectively, primarily due to increased investments in
our current and projected future growth.

Since our inception, we financed our operations through cash collected from
customers as well as preferred equity financings, our initial public offering
and concurrent private placement completed in May 2013, and our follow-on public
offering completed in September 2013. We also maintain a credit facility. As of
March 31, 2014, we had outstanding borrowings of $7.3 million under this
facility.

Seasonality, Cyclicality and Quarterly Trends

We have historically experienced seasonality in terms of when we enter into new
customer agreements for our service. We sign a significantly higher percentage
of agreements with new customers as well as renewal agreements with existing
customers in the fourth quarter of each year as compared to any of the prior
quarters. The first quarter and third quarter are typically the slowest in this
regard. Furthermore, we usually sign a significant portion of these agreements
during the last month, and often the last two weeks, of each quarter. This
seasonality is reflected to a much lesser extent, and sometimes is not
immediately apparent, in our revenue, because we recognize subscription revenue
over the term of the license agreement, which is typically one year, but
generally ranges from one to three years. As a result, a slowdown in our ability
to enter into customer agreements may not be apparent in our revenue for the
quarter, as the revenue recognized in any quarter is primarily from customer
agreements entered into in prior quarters. Historical patterns should not be
considered a reliable indicator of our future sales activity or performance.

Our revenue has increased over the periods presented due to increased sales to
new customers, as well as increased usage of existing and new products by
existing customers. Our operating expenses generally have increased sequentially
in every quarter primarily due to increases in headcount and other related
expenses to support our growth. We anticipate our operating expenses will
continue to increase in absolute dollars in future periods as we invest in the
long-term growth of our business.

In addition, each year we typically participate in several key industry trade
shows, including our own annual user conference, which typically occurs in the
second quarter of the fiscal year. The timing of these events can vary from year
to year, and the costs associated with these events typically have a significant
effect on our sales and marketing expenses for the applicable quarter and cause
our quarterly results to fluctuate.

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Results of Operations for the Three Ended March 31, 2014 and 2013

The following tables set forth our results of operations for the periods
presented and as a percentage of our total revenue for those periods. The
period-to-period comparison of financial results is not necessarily indicative
of financial results to be achieved in future periods.

Total revenue increased $12.6 million, or 64%, during the first quarter of 2014
compared to the comparable period in 2013, due to the increase in subscription
and support revenue of $11.1 million and an increase in professional services
revenue of $1.5 million.

The increase in subscription and support revenue was primarily attributable to
(1) growth in our total customer count primarily from the SMB market and
customers added in the first three months of 2014 who generally had larger
record databases, on average, managed by our solution than the customers that we
added in the first three months of 2013 and (2) our subscription dollar
retention rates have increased as a result of higher customer retention rates,
volume and price increases resulting from the lapsing of introductory discounts
on subscriptions and growth in both usage rights (driven by higher use,
consumptions and/or database size of our products used by existing customers)
and cross sell of additional products either during the term of their
subscription or at the point of renewal of their subscription.

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Of the total increase in subscription and support revenue for the first quarter
of 2014, 69% was attributable to revenue from new customers acquired from
April 1, 2013 through March 31, 2014, and 31% was attributable to revenue from
customers existing on or before March 31, 2013.

The increase in professional services revenue resulted from increased delivery
of services across our customer base. During the fourth quarter of 2013, we
added a higher proportion of enterprise customers and the majority of these
projects for our enterprise customer base were delivered during the first
quarter of 2014. We expect professional services revenue from enterprise
customers to continue to comprise a larger proportion of the total balance in
future quarters.

The increase in cost of subscription and support for the three months ended
March 31, 2014 reflects an increase in personnel-related costs (salary, benefits
and stock-based compensation) and depreciation and amortization expense. The
increase in salary and benefit costs primarily reflects an increase in headcount
directly associated with our cloud infrastructure, customer support and customer
success organizations to support our customer growth, while the increase in
stock-based compensation reflects grants of additional equity awards to existing
employees and of equity awards to new employees. The increase in depreciation
and amortization expense reflects the completion of our transition to
co-location data center facilities at the end of fiscal 2013, where we now
manage our own computer equipment and systems. These increases were partially
offset by a decrease in hosting costs for the three months ended March 31, 2014
as compared to the corresponding period in 2013 as a result of our decreased use
of a managed hosting service provider due to the completion of the transition to
our own co-location data center facilities.

Our subscription and support gross margin were 78.2% and 66.8% for the three
months ended March 31, 2014 and 2013, respectively. The increase in
subscription and support gross margin for the three months ended March 31, 2014
primarily reflects the transition to our own co-location data center facilities
from a managed hosting service provider which we completed at the end of fiscal
2013.

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Cost of professional services and other increased due to the following (in
thousands):

The increase in cost of professional services and other during the three months
ended March 31, 2014 was due primarily to an increase in personnel-related costs
(salary, benefits and stock-based compensation). The increase in salary and
benefit costs primarily reflects an increase in headcount as we continue to grow
our professional services organization to support demand for expert marketing
services, while the increase in stock-based compensation reflects grants of
additional equity awards to existing employees and of equity awards to new
employees. Additionally, consulting costs increased as a result of increased
usage of outside contractors to supplement our existing staff.

Our professional services and other gross margin were (31.5)% and (20.0)% for
the three months ended March 31, 2014 and 2013, respectively. The decrease in
gross margin was due in part to lower staff utilization. As we have added
headcount in our professional services group, these new employees undergo a
training period before becoming fully billable, and as a result, their
associated costs have a near-term negative impact on gross margins.

We expect that cost of revenue may increase in the future depending on the
growth rate of new customer acquisition. We also expect that cost of revenue as
a percentage of total revenue could fluctuate from period to period depending on
growth of our professional services business and any associated costs relating
to the delivery of professional services, the timing of sales of products that
have royalties associated with them and the timing of significant expenditures.

The increase in research and development expenses during the three months ended
March 31, 2014 was primarily due to an increase in personnel-related costs
(salary, benefits and stock-based compensation). The increase in salary and
benefit costs primarily reflects the increase in headcount to help continue the
enhancement of our existing product suite and to a lesser extent, an increase in
headcount from our acquisition of Insightera in December 2013, while the
increase in stock-based compensation reflects grants of additional equity awards
to existing employees and of equity awards to new employees. The increase in
depreciation and amortization expense is primarily driven by growth in
depreciable assets. These increases were partially offset by an increase in
capitalized software development costs, which consists primarily of
personnel-related expenses.

We believe that continued investment in our technology is important for our
future growth, and, as a result, we expect research and development expenses to
increase in absolute dollars, but decline modestly, as a percentage of total
revenue for the remainder of 2014.

The increase in sales and marketing expenses during the three months ended
March 31, 2014 was due primarily to an increase in personnel-related costs
(salary, benefits and stock-based compensation). The increase in salary and
benefit costs was primarily driven by an increase in headcount for our sales,
marketing and business development employees and executives, while the increase
in stock-based compensation reflects grants of additional equity awards to
existing employees and of equity awards to new employees. The increase in
marketing program costs reflects increased activity to support growth in our
business. The increase in the allocation of facility and IT expenses was due
principally to headcount growth in the sales and marketing department as
compared to other departments and overall higher IT and facilities expenses.

We expect sales and marketing expenses to increase in absolute dollars and
remain our largest expense in absolute dollars and as a percentage of total
revenue, although they may fluctuate as a percentage of total revenue for the
remainder of 2014.

The increase in general and administrative expenses during the three months
ended March 31, 2014 was primarily due to increased personnel-related costs
(salary, benefits and stock-based compensation). The increase in salary and
benefit costs was primarily driven by an increase in headcount for our
administrative, legal, human resources, finance and accounting departments,
while the increase in stock-based compensation reflects grants of additional
equity awards to existing employees and of equity awards to new employees. The
increase in professional services represents increases in both legal and
accounting fees, primarily from supporting our international expansion and our
Sarbanes-Oxley compliance efforts. The increase in recruiting expense reflects a
general increase in the use of outside recruiters as we added more headcount
throughout the Company. The decrease in consulting fees reflects our decreased
use of external consultants during the first three months of March 31, 2014, as
we utilized outside consultants to assist us with preparatory work associated
with our IPO in the comparable quarter of 2013.

We expect that our general and administrative expenses will increase in absolute
dollars as we continue to expand our business and infrastructure to support
being a public company although they may fluctuate as a percentage of total
revenue for the remainder of 2014.

Liquidity and Capital Resources

To date, we have financed our operations through cash collected from customers
as well as preferred equity financings, our IPO and concurrent private placement
completed in May 2013, and our follow-on public offering completed in
September 2013. We also maintain a credit facility. As of March 31, 2014 and
December 31, 2013, we had cash and cash equivalents of $119.6 million and
$128.3 million, respectively, most of which was held in money market accounts.

In May 2012, we entered into a loan and security agreement with a bank related
to a credit facility providing us with an equipment line of up to $4.0 million.
. . .